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- 1. Los Angeles Clippers1 Team Value $575 M (as of January 2014)2 At a Glance Valuation Breakdown Owner3 : Donald Sterling Sport4 : $216 M Championships: 0 Market5 : $198 M Price Paid: $12.5 M Stadium6 : $100 M Year Purchased: 1981 Brand7 : $64 M Metro Area Population: 16.4 M 1-Yr Change: 34% (Annualized Change8 : 12%) Venue: Staples Center (leased from AEG thru 6/2024)9 Revenue per Fan10 : $10 Capacity: 18,997 Debt/Value11 : 0% Average Ticket Price: $63 Revenue12 : $128 M TV Partner: Prime Ticket Operating Income13 : $15.0 M Ratings: 55% increase over 12-13 season (5th in NBA) Player Expenses14 : $80 M Radio Partner: KFWB Talk 980 Gate Receipts15 : $41 M Major Sponsors16 : Suspended or Terminated Wins-to-player cost ratio17 : 122 1 The Los Angeles Clippers National Basketball Franchise (the Clippers). All figures courtesy of Forbes. 2 Value of team based on current arena deal (unless new arena is pending) without deduction for debt (other than arena debt). 3 Subject to lifetime ban by National Basketball Association effective April 29, 2014. 4 Portion of franchise's value attributable to revenue shared among all teams. 5 Portion of franchise's value attributable to its city and market size. 6 Portion of franchise's value attributable to its arena. 7 Portion of franchise's value attributable to its brand. 8 Current team value compared with latest transaction price. 9 In addition, the Clippers operate the $50 M Clippers Training Center in Playa Vista, California. 10 Local revenues divided by metro population with populations in two-team markets divided in half. 11 Includes arena debts. 12 Net of arena revenues used for debt payments. Revenue and operating income are for 2012-13 season and net of revenue sharing and arena debt service. 13 Earnings before interest, taxes, depreciation and amortization. 14 Includes benefits and bonuses. 15 Includes club seats. 16 As of April 29, 2014, twelve companies (State Farm, Red Bull, Kia Motors, Aquahydrate, Lumber Liquidators, Yokohama Tire Corporation, Corona, Samsung, Sprint, Adidas, Burger King, and MGM Resorts) had suspended their sponsorship of the Clippers, four had terminated their sponsorship (Carmax, Virgin America, Chumash Casino, Mercedes-Benz) and one had affirmed its intention to permit its sponsorship to expire (Amtrak).
- 2. Profile The popularity of the Clippers has surged in recent years led by All-Star point guard Chris Paul and highlight reel staple Blake Griffin. TV ratings for Clippers games on Prime Ticket surged 55% last year and commanded the fifth biggest audiences in the NBA. The Clippers racked up the two best regular season performances in franchise history over the last two years. The Clippers share the Staples Center with the Lakers and the Kings of the NHL in the only tri-tenant situation of its kind in North America. The Clippers signed a 10-year extension of their lease at Staples last year that ties the team to the arena at least through the 2023-24 season. Recent Developments Every NBA Owner Will Vote In Favor Of Forcing Sterling To Sell the Clippers NBA Commissioner Adam Silver announced today that besides the lifetime ban the league gave Los Angeles Clippers owner Donald Sterling for his racist remarks, Silver is going to urge the Board of Governorswhich is comprised of all 30 team ownersto force Sterling to sell the team. Three-fourths of the owners need to vote in favor to force Sterling to sell. But that is a meaningless percentage in this case. You can be sure that every NBA owner will vote in favor of the sale. One reason for the unanimous vote: which owner would be willing to risk voting in favor of letting Sterling keep the Clippers and having that vote leaked to the media or NBA Players union? The fallout for that owner would be so devastating that it could force that owner to sell their team. Financially, the league is not worried about a court battle with Sterling should he decide to take legal action. In such an instance Silver could get each team owner to chip in to fund the legal costs. And a portion of the proceeds from the sale of the teamwhich would be at least $7o0 million based on the recent $550 million sale of the Milwaukee Buckscould be used pay the owners back for their legal costs. The vote is a no-brainer for the owners. David Geffen: I Would Very Much Like To Buy The Clippers The NBAs ban of Los Angeles Clippers owner Donald Sterling is only a few hours old, but there is already one billionaire who says he is interested in buying the basketball franchise. 17 Compares the number of wins per player payroll relative to the rest of the NBA. Playoff wins count twice as much as regular season wins. A score of 120 means that the team achieved 20% more victories per dollar of payroll compared with the league average during the 2012-13 season.
- 3. Media mogul David Geffen told Forbes today that he would very much like to buy the team if the league compels Sterling to sell the Clippers. Geffen, who has an estimated net worth of about $6.2 billion, did not otherwise comment on the situation other than to affirm his interest in a team he has long coveted. Geffens opportunity may come if NBA Commissioner Adam Silver can convince the leagues Board of Governors to force a sale of the team following Sterlings racist remarks which were previously recorded and published last week. Earlier Tuesday, the NBA fined Sterling $2.5 million and banned him for life from league activities and events. We stand together in condemning Mr. Sterlings views, said Silver. They simply have no place in the NBA. Sterling, who is worth $1.9 billion, bought the Clippers in 1981 for $12 million and has rebuffed numerous offers for the franchise in his more than 30 years of ownership. Among those past suitors was Geffen, who tried to buy the team in 2010. Sources at the time pegged Geffens offer to be around $700 million, while other reports noted his interest in luring then-free agent LeBron James to the team before the player eventually signed for the Miami Heat. Mr. Sterling has never expressed a desire to sell any part of his team, Clippers President Andy Roeser said in a statement to the Los Angeles Times in 2010. Because it is an asset of remarkable value, its true that there have been countless inquiries over the years. But the Clippers have never been for sale. That stance will have to change if Silver and the NBAs other 29 owners exercise their authority to make the Los Angeles businessman sell the team in an unprecedented move. Forbes estimates that the Clippers are valued at $575 million as the NBAs 13th most valuable franchise. Geffen, who is mostly retired and long removed from his days as a music and entertainment tycoon, certainly has the time and pocketbook for such a purchase. A noted philanthropist, he currently splits his time between homes in New York and Los Angeles and his yacht, Rising Sun. Hes given or pledged a total of $300 million to the University of California, Los Angeles medical schoolwhich is named after himand recently pledged $25 million toward a new L.A. film museum in April 2013. Distressed Asset Lovers Pay Huge Premium For Milwaukee Bucks In a rather inexplicable deal, Marc Lasry and Wesley Edens, two men who got rich in part by buying damaged assets at bargain basement prices, have agreed to pay $550 millionat least $50 million more than anyone else was considering payingfor the Milwaukee Bucks.
- 4. Half the deal is spot on with the two hedge fund managers historiesthe Bucks are the dregs of the NBA. But the hefty premium runs counter to how Lasry and Edens made their fortunes. The NBA landscape has not changed since the Sacramento Kings were sold for $534 million a year ago (well before the Kings sale people were talking about the potential value in the NBAs next national broadcasting deal), and that deal included roughly $100 million of real estate and an arena (albeit one that is antiquated). So Lasry and Edens effectively paid $100 million more for the Bucks despite Milwaukee being a much smaller market than Sacramento. This may explain why no other potential buyers were willing to even pay $500 million for the Bucks. All the sports bankers and people familiar with the sale process that I spoke with say most of the offers for the basketball team were in the low-to-mid $400 million range. Two people said their clients were willing to pay in the high fours, with one of them telling me they had to really stretch to make that number work. Inner Circle Sports, which represented Lasry and Edens in the purchase, did not respond to an email query about the purchase price. Nor did a representative for the two buyers. Could the $550 million be a doctored figure? Recall that when Michael Jordan bought the Charlotte Bobcats in 2010 some media reported the price as $275 million although the real purchase priceenterprise valuewas only $175 million. Neither the NBA or a rep for the buyer of the Bucks would comment on the $550 million figure, but I have spoken to a few people with knowledge about the transaction who say the enterprise value is indeed very close to $550 million. Not long after Herb Kohl hired Steve Greenberg of Allen & Co to sell his basketball team back in December, Greenberg told the NBA that he would get more for the Bucks than the Kings were sold for. He was true to his word. But why did Lasry and Edens acquiesce?
- 5. The Opportunity The sale of the Clippers is imminent. The key question is not if but when. And, with the writing on the wall, Clippers fans everywhere are asking themselves another question: who?Together we can make the answer to that question: you.There is no reason why ownership of the worlds premier sports teams mustremain the privilege of its billionaires. The Green Bay Packers, owned today by 364,122 fans through Green Bay Packers, Inc. (a publicly owned nonprofit corporation), represents one of the most remarkable and inspiring stories in the history of American sports and business. Through periodic stock sales, unselfish fans have kept the Packers competitive and beloved for nearly 100 years.18 This extremely challenging moment for the Clippers organization represents an historic opportunity for Clippers fans everywhere to do something similar. The raw numbers show the team could fetch in excess of $780 million if put up for sale and several groups (i.e. the usual billionaires) have already stepped forward to express an interest in buying the team, which could result in a bidding war that would drive the sale price over $1 billion. We can sit back and let the billionaires have our team or we can give them a taste of what its like to lose. It will not be easy. But then again nothing that is worth doing ever is. Together lets show the world: We Are Los Angeles. 18 To protect against someone taking control of the team, the articles of incorporation prohibit any person from owning more than 200,000 shares. The corporation is governed by a board of directors and a seven-member executive committee. Shareholders do not receive any dividend on the investment. For information on shareholder history, please visit the Packers website here: http://www.packers.com/community/shareholders.html